Disposition of Properties and Assets Held for Sale

9 Months Ended

Sep. 30, 2024

Disposition of Properties and Assets Held for Sale

Disposition of Properties and Assets Held for Sale

9. Disposition of Properties and Assets Held for Sale

In the three months ended March 31, 2023, the Company sold one office property located in Elk Grove, Illinois on March 10, 2023, for a sales price of $29.1 million, at a gain of approximately $8.4 million. The Company used the proceeds of the disposition principally to repay a portion of outstanding indebtedness. In the three months ended September 30, 2023, the Company sold one office property located in Charlotte, North Carolina on August 9, 2023 for a sales price of $9.2 million, at a loss of $0.8 million. During the three months ended September 30, 2023, the Company recorded a gain on sale of $53,000 as a result of conveying approximately 7,826 square feet of land at the Company’s Addison, Texas property to the Town of Addison as part of a road revitalization project.

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Miami, Florida for a gross sales price of approximately $68.0 million and recorded an impairment loss of $19.2 million. The property was sold on December 6, 2023, at an actual loss of $18.9 million. During the three months ended September 30, 2023, the Company also entered into an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million. This property was classified as held for sale at September 30, 2023 and the Company recorded an impairment loss of $20.5 million in the three months ended September 30, 2023 based on the fair value less cost to sell, which was less than the carrying value. This agreement was terminated in November 2023. The Company recorded these properties at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $39.7 million in the three months ended September 30, 2023. The reclassification is a non-cash investing activity on the statement of cash flows. The Company estimated the fair value of these properties, less estimated costs to sell, using the offers to purchase the properties made by third parties (Level 3 inputs, as there is no active market).

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Plano, Texas for a gross sales price of approximately $48.0 million at an expected gain of $10.6 million. The property sold on October 26, 2023 at the expected gain of $10.6 million.

During the three months ended March 31, 2024, the Company sold one office property located in Richardson, Texas on January 26, 2024, for a sales price of $35.0 million at a loss of approximately $2.1 million, which was recorded as an impairment during the year ended December 31, 2023. An additional $5,000 of costs related to the sale were recorded during the three months ended March 31, 2024.

During the three months ended September 30, 2024, the Company entered into a new agreement to sell the property in Atlanta, Georgia for a gross sales price of $34.0 million and recorded an additional impairment loss of $6.6 million based on the fair value less cost to sell. At September 30, 2024 and December 31, 2023, the office property remained classified on the consolidated balance sheet as an asset held for sale in the amount of $32.9 million and $39.0 million, respectively and was comprised of $52.8 million and $52.2 million of real estate assets, net of accumulated depreciation, respectively, $4.4 million of straight-line rents receivable, and $2.9 million of deferred leasing commissions, net of accumulated depreciation. The Company estimated the fair value of these properties, less estimated costs to sell, using the offers to purchase the properties made by third parties (Level 3 inputs, as there is no active market).

During the three months ended September 30, 2024, the Company sold a property located in Glen Allen. Virginia for a gross sales price of $31.0 million at a loss of approximately $13.2 million, which had previously been recorded as an impairment as of June 30, 2024. The Company used proceeds of $25.3 million, or 90% of the net proceeds from the disposition, to repay a portion of its outstanding indebtedness. An additional $0.7 million in costs related to the sale of properties previously sold was recorded in the three months ended September 30, 2024.

The Company reports the results of operations of its properties that have been disposed of or classified as held for sale in its consolidated statements of operations, which includes rental income, rental operating expenses, real estate taxes and insurance and depreciation and amortization.

The operating results for the properties that the Company disposed of or classified as assets held for sale are summarized

below:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2024		2023		2024		2023
Rental revenue	$	1,309	$	7,925	$	7,001	$	23,842
Rental operating expenses		(643)		(2,747)		(2,799)		(7,673)
Real estate taxes and insurance		196		(1,027)		(295)		(3,292)
Depreciation and amortization		—		(1,895)		(832)		(7,916)
Income from dispositions and assets held for sale	$	862	$	2,256	$	3,075	$	4,961